Monday, March 2, 2009

The Tribe In The Media: Tribe's Next Competitor In Pennsylvania

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This installment of The Tribe In The Media is an article in Pennsylvania's Times Leader newspaper regarding the opening of a large slot parlor about 70 miles away from the Tribe's Pocono Downs facility. The new slot parlor is expected to open in late May and will compete with Pocono Downs to some extent. The state is also looking at allowing bars to operate video poker machines which would further cut into slot parlor revenues.

Proposal to legalize video poker more a concern than Sands casino in Bethlehem
Local casinos set for Sands competition
By Andrew M. Seder
Times Leader
March 2, 2009

The opening of the Sands casino in Bethlehem this spring is sure to have an impact on the Mount Airy Casino near Mount Pocono and the Mohegan Sun at Pocono Downs in Plains Township. But both venues are prepared for the competition and believe any loss of business will be limited. Rather than other casinos, Gov. Ed Rendell’s proposal to legalize video poker machines in bars and clubs is seen as the bigger threat.

Mohegan Sun President Robert Soper said there will be some loss of customers after Sands Bethlehem opens, but he believes all three facilities can coexist in the northeastern quadrant of the state.

Doug Niethold, vice president of finance for the Sands, said the Lehigh Valley, southern Poconos and central and northern New Jersey will be the primary markets they’ll look to draw from.

None of those are within the primary markets Mohegan Sun caters to.

Soper said “less than 1 percent” of Mohegan Sun customers come from New Jersey. He said overall, as much as 4 to 5 percent of Mohegan Sun’s total revenues could be affected by the Sands’ opening.

Pete Peterson, spokesman for Mount Airy, said he’s not afraid of the Sands’ opening.

“In this industry, you can’t be afraid of competition. That’s the nature of the industry,” Peterson said.

Mount Airy lies squarely between Mohegan Sun and Bethlehem, about an hour’s drive from each. But Peterson said what Mount Airy has to offer sets it apart from its neighbors.

“We’re a complete resort facility,” he said, mentioning amenities including a hotel, spa, nightclub, slot machines and restaurants. “Bethlehem is more of just a gaming floor.”

He agreed that some Mount Airy customers will have their interest piqued by something new and may head to Bethlehem to check out the Sands when it opens, but he expects most of those that do will come back to the Poconos.

“It’s going to have an impact, but it’s something we’re going to meet head on,” Peterson said.

Jim Wise, the vice president of marketing for Mohegan Sun, agreed that “people will travel to try a new product” but said he’s confident that existing customers who have been cultivated by the casino’s promotions will remain loyal to Mohegan Sun.

That’s an “advantage to being established first,” Soper said.

Still, when Mount Airy opened its doors, wagering at Mohegan Sun fell by about 15 percent for several months, according to data from the state Gaming Control Board.

Soper doesn’t expect as much impact this time, since the Sands is much farther away than Mount Airy. He added that he takes some comfort in the idea that “ultimately we do serve fundamentally different markets” but he’s not ready to take anything for granted.

“We certainly won’t underestimate anyone entering the market,” Soper said.

Saturation is more of a concern for casinos closer to Pennsylvania’s borders, attendees at last week’s Pennsylvania Gaming Congress in Harrisburg said. Competition is here or on the horizon from Maryland, which has approved slots; West Virginia, which recently approved table games for some of its gaming venues; established casinos in Delaware and New Jersey; and New York, which has a 4,500-slot machine venue set to debut at Aqueduct Raceway later this year.

Poker proposal
Of more concern to casino operators is Rendell’s proposal to legalize tens of thousands of video poker machines at bars and social clubs.

Concerns over oversight and equitability were raised by several panel members including Wise. He said that background checks, hearings and millions of dollars were demanded of the state’s casino operators before licenses could be obtained, and for bars and clubs to now step in and be given legal authority to operate the devices reeks of unfairness.

Rendell’s plan calls for using the revenue raised from the video poker machines to fund tuition for students wishing to attend any of the 14 state universities or community colleges.

“Raising money for higher education is a worthy goal, and we would never dispute that. The method of raising these funds makes little sense,” Soper said.

He said bringing up to 80,000 video poker machines online “would be extremely detrimental to the (casino) industry.” If the goal is to raise funds for higher education, there’s a more secure and already well-regulated way to do it, he said.

Soper said legalizing table games at casinos and then allocating a percentage of the revenues for tuition for higher education makes more sense and is something he and other casino operators could support.

He said adding table games also would create hundreds of jobs across the state, something legalizing video poker machines likely wouldn’t do. At Mohegan Sun alone, it could mean between 400 and 500 new jobs, Wise estimated.